What Uptown Charlotte was supposed to look like before the financial crisis
Ten years ago, Charlotte’s future as a banking hub was perilously uncertain as the financial crisis roiling the nation also struck the region, rocking its large financial services industry.
At the height of the downturn, “Banktown” would end up losing the headquarters of Wachovia when it was bought by San Francisco’s Wells Fargo — a huge blow to a city that defined itself by banking. In another major development, Bank of America’s chief executive stepped down amid fallout from the purchase of Merrill Lynch, stoking fears about whether the bank would remain headquartered in Charlotte under the next CEO.
A decade later, Charlotte has bounced back from the crisis but remains changed by it. Among other things, the city claims fewer bank headquarters than it used to, the CEOs of Charlotte’s two biggest banks no longer live here and major real estate projects had to take on a different form.
Here are six ways the region is different than it was before the dark days of 2008:
Fewer bank headquarters
In 2007, the city was home base to eight banks, including arch rivals Wachovia and Bank of America but also smaller institutions like The Scottish Bank and Bank of Commerce.
Now, that list is down to just one, Bank of America, as the other names have been swallowed up in acquisitions.
The biggest headquarters to disappear from Charlotte belonged to Wachovia — the fourth-largest U.S. bank by assets when Wells Fargo agreed to buy it in the fall of 2008 as it neared collapse. At the time, Wachovia was reeling from losses largely related to its 2006 acquisition of mortgage lender Golden West Financial Corp.
Since then, Charlotte has lost the headquarters of even more banks as firms have continued to consolidate, a trend seen nationwide. New regulations from 2010’s Dodd-Frank financial-overhaul law have helped encourage banks to get larger so they can spread higher compliance costs across a bigger entity, experts have said.
The loss of bank headquarters is also a key reason Charlotte now has a loose grip on its title as the nation’s second-largest banking center by assets held by banks based in the city.
Charlotte regained the No. 2 spot this year from San Francisco, according to an analysis for the Observer by S&P Global Market Intelligence. But Charlotte has less than a 2 percent lead by total assets.
Even with the headquarters losses, retired Bank of America chief executive Hugh McColl Jr. said Charlotte’s banking industry remains robust.
“The big banks here have spawned a lot of talent and brought a lot of talent here,” he said. “The clear thing is that we remain a very important financial city.”
Gained a hub
Though Charlotte lost Wachovia, it gained something else: a major Wells Fargo employment hub.
With the acquisition, Wells established an East Coast headquarters in the region, where it employs about 25,000. That surpasses the approximately 20,000 workers Wachovia employed here in 2008, as Wells has continued to grow the hub.
In Charlotte, Wells’ employees represent a wide range of business lines, from branch banking and mortgage servicing to wealth management and trading.
But there was a period following the Wachovia acquisition announcement when many in Charlotte wondered whether Wells would keep Wachovia’s workforce intact. At the time, Wachovia was Charlotte’s second-largest employer.
“The reaction was tremendous uncertainty,” Charlotte historian Tom Hanchett said.
Still, the loss of Wachovia did hurt Charlotte somewhat by costing it high-paying corporate roles that were with the bank, UNC Charlotte economist John Connaughton said.
“You lost a lot of seven-figure jobs,” he said.
CEOs don’t live here
Before the crisis, the then-CEOs of Wachovia and Bank of America not only led their banks from Charlotte — they lived here, too. That’s not the case with the current chief executives of Wells Fargo and Bank of America.
Wachovia’s board ousted Ken Thompson in 2008 as mortgage losses rose at the bank. After Wells bought Wachovia, John Stumpf ran it from California, where current CEO Tim Sloan resides.
Ken Lewis announced plans in 2009 to step down from Bank of America as he came under fire for the bank’s purchase of Merrill Lynch. At the time, Bank of America faced state and federal probes over what it should have disclosed to shareholders before they voted for the purchase, among other fallout from the deal.
Bank of America’s search for a replacement for Lewis sent anxiety rippling through Charlotte, as locals wondered whether the headquarters would remain here if the new leader didn’t want to live in Charlotte. Those worries prompted efforts by city and state leaders to prevent the headquarters from being uprooted, the Observer reported at the time.
The bank ultimately replaced Lewis with consumer banking head Brian Moynihan, who has continued to live in Boston and commute to Charlotte since taking over in 2010.
Since the crisis, Wells Fargo and Bank of America have remained major philanthropic providers in Charlotte, donating millions of dollars in the region, and executives for the banks have continued to serve on local boards and hold leadership roles in civic causes.
But Michael Walden, economics professor at N.C. State University, said cities can benefit more when CEOS actually live there.
“There seems to be a pattern of they take a very active role in civic affairs,” he said. “They can be cheerleaders for civic projects.”
McColl and other Charlotte business leaders such as John Belk and Ed Crutchfield were part of a collection of local CEOs known as “The Group” who got together in the 1980s and 1990s to take on local civic issues. Members of The Group also played a large role in projects that helped shape Charlotte into what it is today, including finding land for an NFL stadium and building uptown’s transit center.
Economy more diverse
Charlotte’s economy has also changed since the crisis, as the percentage of financial services jobs has remained nearly flat while other industries have become more prominent.
In the metro area, the finance sector accounted for 86,477 jobs on average in the second quarter of this year, or 8.1 percent of jobs in all industries, according to an Observer analysis of North Carolina Commerce Department data. A decade ago, finance employed about 71,000, or 7.9 percent of all workers.
Other industries have taken up a larger share of the region’s economy over the period.
For example, the service sector accounts for about 85 percent of jobs, up about three percentage points. Professional and business services and the leisure and hospitality industry are up 2 percentage points each.
While the crisis was a painful experience for Charlotte, the expansion of other industries such as energy is good for the region, UNCC’s Connaughton said.
“Ultimately, change for the better for Charlotte,” he said.
Subprime jobs gone
A key cause of the crisis was subprime mortgages sold to high-risk borrowers. Banks and other lenders pulled back on such products in the crisis, closing operations and shedding jobs in Charlotte and elsewhere.
Those include Charlotte-based Ameritrust Mortgage Co., which announced plans in 2007 to shutter its subprime unit, which was home to about 80 of its 100 employees, the Observer reported at the time.
That same year, HSBC Holdings PLC announced plans to close a Lancaster County, S.C.-based subprime operation, Decision One Mortgage, the Observer reported. The move was expected to eliminate 369 jobs in the Charlotte area, the paper reported.
In 2009, subprime lender EquiFirst announced it was closing its southwest Charlotte operations, affecting 548 employees, according to notifications the Charlotte-based company filed with the state at the time.
Today, mortgage lenders in Charlotte have continued to slash local jobs as they say fewer borrowers are behind on their loans than during the height of the crisis.
This month, Wells Fargo said it was laying off 111 workers in its Fort Mill, S.C., mortgage operations. Those employees were primarily involved in servicing borrowers who had fallen into default, the bank said. It noted that it has seen a significant decline in such customers because of improvements in the housing market and lower delinquency and foreclosure rates.
Projects canceled, changed
Many Charlotte real estate projects that were in the works around the time of the crisis might look different today if the downturn hadn’t happened. Here are some prominent projects that were affected by the crisis:
▪ Museum Tower, an apartment complex on top of the Mint Museum in uptown, was initially planned as condominiums before the crisis and real estate market downturn. Wachovia had planned the tower as part of the Levine Center for the Arts campus, along with the office building that is now Duke Energy Center. The condo tower was put on hold as the crisis worsened and was later reborn with about 400 apartments, where residents moved in last year.
▪ Duke Energy Center, at Tryon and Stonewall streets, was supposed to be Wachovia’s new headquarters building before the bank was swallowed up by Wells. The building was still under construction when Wells inherited it. Duke decided to make the 48-story building its headquarters tower, which opened in 2010 but remains owned by Wells.
▪The Vue opened in 2010 as a 51-story luxury condominium tower in uptown at Graham and Pine Streets. It was planned before the crisis and its opening was seen as a symbol of the city’s comeback. But it struggled to find buyers as the real estate market remained weakened. Adding to the Vue’s challenges, some buyers sued to get out of their contracts and in 2012 it fell into foreclosure, the Observer reported at the time. That same year, the project sold at auction to a group that decided to convert it to luxury apartments.
▪ The EpiCentre entertainment hub on uptown’s Trade Street was supposed to be topped with a 51-story condominium tower before the downturn. But the project hit a series of snags, including a 2008 lawsuit brought by the tower’s developer against the developers of the EpiCentre, the Observer reported at the time. The condo project was eventually replaced with a 22-story, dual-branded hotel tower, AC Hotel/Residence Inn by Marriott, which opened this year. Rusting rebar sat for years where the condos were supposed to go.
David Furman, a Charlotte architect and developer, said Charlotte has fewer high-rise condo projects than it would have if the downturn hadn’t caused developers to convert them into apartments.
“There would be a lot more people living downtown, and there would be a lot more ownership of those units downtown rather than renting,” he said. “A lot of projects got scrapped.”
The crisis brought construction to a halt, but development has rebounded strongly, Furman said, noting projects under way across the city.
“The good news is that it’s not stopped anymore,” he said.